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Unformatted text preview: Lecture Problem Solutions
Time Value of Money Day 5 I. ] Scream Ice Cream Company is analyzing several of its upcoming ﬂavors. What is the value
of peanut chocolate crunch if the discount rate is 6.2 percent and the ﬂavor is expected to
generate ﬁxed cash ﬂows forever with the ﬁrst cash ﬂow of $100,000 in 4 years? 1" A. ‘riﬁ‘r gang; “5L; ‘FlIJ‘ a. .n '{I'GUﬂr ﬂa'r rﬂr ll. ac. lama m: Imusl use TL: "cranky (gawk.
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0.961 =l‘clzag53snczl 2. What is the value of nougat swirl if the cost of capital is '12 percent and the ﬂavor is expected
to generate cash flows forever with the ﬁrst cash flow of $90,000 in 5 years and all subsequent cash ﬂows growing annual] by 1.5 percent?
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00110“5 = *I‘S‘iiﬁ‘ll res 3. I Scream Ice Cream Company is analyzing several of its upcoming flavors. What is the value
of coffee toffee if the Opportunity cost of capital is 3.0 percent and the ﬂavor is expected to
generate ﬁxed cash flows of $250,000 with the ﬁrst cash ﬂow in 6 years and the last cash ﬂow in 4' '____.? U
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:3 £0 1'? 250m 0 END S" 30 7 O (56521.13 " W = 15:; 53121 . '1'?E‘ FU $106 great 72? 4. What is the expected annual cash flow generated by peanut butter passion if the project has a
cost of capital of5%, is currently valued at $1.3 Million and is expected to pay 10 equal annual
cash flows with the ﬁrst cash ﬂow 4 years from today? +$ Egg1. P.’ I. I. 'l 1‘. Qinl finn... l‘Yﬂﬁf a; fLi. «nay! (,3: HM‘H’ L‘sHf“. Iﬂlku. ‘+ 1'”: 3 lidHit
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 Spring '09
 MURRAY

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